Industry experts have welcomed the launch of the Royal Mail Collective Plan, with hopes that the launch could act as a "stepping stone" towards scalable whole-life multi-employer collective defined contribution (CDC) schemes.

Royal Mail confirmed that it had launched the new scheme today (7 October), making it the UK's first CDC scheme.

The launch of the new scheme was welcomed by industry experts, with Pensions and Lifetime Savings Association (PLSA) deputy director of policy, Joe Dabrowski, highlighting the launch as "a big day for pensions after years of hard work from regulators, government and industry".

Aon partner and head of CDC, Chintan Gandhi, also highlighted the news as “an important milestone in the UK’s pensions landscape”, which has been over seven years in the making.

This was echoed by LCP head of CDC, Steven Taylor, who said that the launch could “truly be a ‘red letter’ day” for pensions, with many savers, employers and government hoping that CDC pensions could be something of a "panacea", helping to simultaneously solve many problems across the economy.

“The long-term investment approach also makes CDC schemes natural buyers of productive finance assets that government would love to see in the hands of UK pension schemes," he added.

“For employers who are increasingly competing to attract and retain the best staff, this also means an ability to enhance reward strategies by providing better quality pensions, all within current pensions budgets and without the thorny risks of deficits that have in the past plagued defined benefit schemes.”

LCP partner, Helen Draper, said that this development could also propel CDC much further up the pension and reward agenda for many of the UK’s largest and most paternal employers.

“Given the significant advantages CDC schemes could offer to savers and the wider benefits to the UK economy in terms of investment in productive finance, we believe making CDC schemes accessible to a wider population of UK pension savers should be a priority," she continued.

“We expect the government to shortly unveil new regulations that would enable the wider roll-out of these schemes, potentially creating a real shift in the pensions landscape.”

Dabrowski also suggested that the launch could "pave the way" for upcoming regulations enabling multi-employer CDC arrangements, which have the potential to improve retirement outcomes for many savers.

Indeed, Gandhi said that that, "using this as a stepping-stone, we see tremendous value in the government moving on to the swift introduction of scalable whole-life multi-employer CDC schemes".

“We believe these have the significant potential to help over 30 million workers in the UK build up a pension - including the self-employed,” he added.

Hymans Robertson head of DC, Paul Waters, agreed, arguing that while the launch of the Royal Mail CDC scheme is a "highly significant milestone" for the pensions industry, it is important to recognise that this is just the beginning.

"The Royal Mail’s scheme was designed around specific objectives and the way it’s been set up will not be the best path for all schemes thinking about CDC," he stated.

"Other employers will have their own individual objectives and profile of members, which means a range of different types of design will be needed to cater appropriately for different groups.

"As an industry we need to develop a broad range of DC risk sharing options to deliver the greatest benefit to future members.”

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